What are people's goals?
Throughout their lives, your clients will have many different lifestyle and financial goals that they would like to achieve. Although people have different goals, there are some key goals that many Australians have in common, especially when it comes to retirement. However, the biggest goal of all is to be able to live a happy and healthy life.
Working longer and living healthier
If Australians are living longer, they naturally will need to be working longer. But how healthy we will be in the later years of our working life?
Will we be able to work until we qualify for the age pension, which is proposed to rise to 70 years old by 2035?
Importance of mitigating key risks
Investors face a number of risks over their lifetime, but longevity, sequencing and inflation risks are three key risks that are particularly pertinent to retirees. When looking at investments, it is important to bear these risks in mind.
|Longevity risk||The risk of outliving the investment. This is increasingly a problem in Australia as people are living longer.|
|Sequencing risk||The risk of a big downturn in markets (such as the Global Financial Crisis) just before or after retiring, which is generally the point of maximum wealth. A 20% fall at this stage hurts more than any other stage of life.|
|Inflation risk||Purchasing power is likely to halve in retirement if enough capital growth is not sought. This risk is gradual though, it is not a one-off like sequencing risk.|
|Market risk||The risk of general movement in financial markets over time. This risk can be reduced through portfolio diversification.|
|Behavioural bias risk||The risk that investors allow their emotions to drive investment decisions. For example, selling out of growth assets after a fall, this is often the worst thing to do. A long term view of investing should be taken.|
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